Lithium prices are up over 500% over the past 12 months, and the rally seems far from over. Even on a day when most commodities are in the red, lithium is solidly green, up 3% to above $426,500 per ton. For lithium producers, the time to print money has finally arrived.
Lithium Carbonate (CNY/T) – 5 Year Price Chart
While explorers and developers of lithium rush towards a production decision or to market, its producers are in the driver’s seat. Lithium is one of the few assets unphased by the recent market turmoil and uncertainty. Why?
About 20% of all cars sold in China today are electric. At least, that is what the data from January 2022 shows and what the forecasts suggest. An Investor’s Business Daily article, China EV Sales: BYD’s January Sales Skyrocket 362% After Xpeng, Li Auto, Nio Deliveries confirms,
“In 2021, China EV sales surged 169% to a record 2.99 million vehicles, or 14.8% of new sales, according to the China Passenger Car Association (CPCA). China’s electric cars are on track to reach a 20% penetration rate this year, well ahead of the government’s 2025 forecast, according to South China Morning Post.”
For China, this is an astounding achievement. As EV demand continues to rise, demand in lithium, copper and other crucial metals will continue to rise.
U.S. and the World Lag Behind China in EV Adoption
The U.S. is lagging way behind. CNBC’s Michael Wayland confirms in an October 2021 article Americans are buying Teslas, not EVs, but experts say that’s about to change, writing that,
“Sales of electric vehicles are expected to represent less than 4% of U.S. sales in 2021, according to industry forecasters.”
If the U.S. can move that 4% number into the double digits, which most believe it can, the real problem becomes can the industry source enough raw materials to meet demand.
Top Three Lithium Producers Dominate Globally
In Why The U.S. Has A Massive Lithium Supply Problem, CNBC explains that “The United States is far behind, with only 1% of global lithium being mined and processed in the U.S.”
While everyone believes the U.S. will be a net importer of lithium for the foreseeable future – some believe the U.S. is sitting on world-class reserves. CNBC looks at how the U.S. might get back into the lithium game. As it stands today, the world’s top three lithium producers dominate globally. A look at the below chart shows how concentrated global production has become.
One of the guests on CNBC notes,
“Eighty-five percent of 2030s lithium industry doesn’t exist yet, so the next decade is going to see tremendous growth in the lithium industry and battery material supply chains in general.”
So, with so much lithium needed to support the continued adoption of EVs far in the future, the race is on to source and produce battery-grade lithium. Finally, for the U.S. or Canada to unseat Australia, China, or Chile as the world’s top lithium producers, exploration and innovative production solutions must come to the fore.
